Satoru Iwata excited about Nintendo's digital business

Following Nintendo's fiscal year 2013 briefing, during which president Satoru Iwata announced a significant change to the company's E3 presence, a Q&A session was held to address investors' concerns and inquiries. It was a rather humbling discussion, as Iwata had to fess up to Nintendo's slipping performance and defend certain key decisions and changes.

If it wasn't obvious before, it's crystal clear now that no one at Nintendo was prepared for the shift to HD development. "The reason for the delayed release of our first-party titles," Iwata explains in regards to launch window software, "was the fact that completing the games released at the same time as the launch of Wii U required more development resources than expected, so some staff members from development teams working on other titles had to help complete them. In short, the development teams of Pikmin 3 and other future games were understaffed during that period." This resulted in dry period that will last until July, directly impacting the Wii U's sales momentum. You would think that, given seven years of market history upon which to reflect, Nintendo would have been aware of the pitfalls faced by other companies on the 360 and PS3.

But in addressing how Nintendo plans to entice third parties currently skeptical of Wii U's capabilities and market potential, Iwata interestingly placed the spotlight on Nintendo Web Framework, Unity, and the vast ocean of ambitious independent developers. He claims that "it is more challenging to sell packaged software for around $50-$60" than ever before, and this combined with the rise in acceptance of digital versions of 3DS packaged software and the flexible development policies on eShop support his plan to greatly expand Nintendo's digital presence. Indies are key to a strong digital business, but the implication as I understand it is that big publishers are much less so.

The specific question presented to Iwata reads, "I am wondering if the current slow sales of Wii U will have any influence on the attitude of software developers overseas. In frequently receiving inquiries from individual investors, they seem to have the impression that the Wii U system is not so powerful and that few third-party games will be developed in the future. The current weak software lineup has deepened their concerns. I would like to hear your view on this point."

The obvious response would be to parade a list of notable names -- Activision, Electronic Arts, Square Enix, Capcom, Take-Two Interactive, etc. -- and describe how Nintendo has been aggressively negotiating with these companies in order to deliver a healthy supply of third-party content and turn around Wii U's fortunes. Instead, Iwata brought up Nintendo's GDC presentation and the package of web technologies that smaller teams are finding very attractive. While there is no doubt that big boxed software is indeed coming, by focusing on Nintendo's digital initiative, it's almost as though Iwata feels that indies are much more crucial to industry growth than the major publishing space.

But fear not, as Nintendo does not have any intention of pulling out of boxed software. In fact, when addressing the possibility of moving towards cloud gaming, Iwata brings up network latency issues as the reason why that option is not being pursued. "[A]t this point in time, I do not think that acquiring a cloud gaming company will in any way improve our performance," he states -- a reference to Sony and its acquisition of Gaikai, perhaps?

Iwata also addresses his additional role as NoA CEO and how it will play in the company's overseas plans, which includes more effective advertising methods via Nintendo Direct and social media. If all goes well and Iwata can turn around North America's struggles, Nintendo will make its ¥100 billion profit by the end of this new fiscal year. That's the hope, anyway.

The more I think about it, the more confident I am that whoever can best serve indies will be in the strongest position as this new generation really starts to heats up. It's hard to see the traditional market as anything but poisonous these days.

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